Microsoft Adds Behavioral Targeting

Microsoft Corp. has started linking users' search habits with other personal
information as it prepares to show more personalized advertisements.

With the use of small data files known as cookies, Microsoft can link information
users provide when they sign up for Hotmail e-mail and other services with data
on what they view and search for on various Microsoft sites, such as those for
maps, Web journals and finance.

Microsoft uses that information to build a profile for a certain class of users
-- women over 30 who read financial news, for example -- and sell marketers
the opportunity to reach that targeted group as they surf Microsoft properties.

The company joins Yahoo Inc. and other major Internet sites in implementing
personalized ads based on Web surfing habits, a practice known as behavioral
targeting. Microsoft's spin on the tactic, which brings demographic information
together with online behavior, may make targeting more accurate, said Emily
Riley, advertising analyst for JupiterResearch.

Microsoft competes with Yahoo, Google Inc. and countless smaller sites for
online advertising dollars. It launched a proprietary online ad system over
the summer intended to help close the gap with Google and Yahoo, but saw just
5 percent growth in online advertising revenue in the quarter ended Sept. 30.
Meanwhile, Google's focus on contextual ads, or keyword-driven text links that
appear next to search results or Gmail messages, has been extremely lucrative.

Microsoft rolled out the behavioral targeting technology in early September,
after testing it for about a year. The company said it plans to expand its use
around the world, but did not disclose any dates.

Microsoft found that behavioral targeting increased by as much as 76 percent
the likelihood a visitor would click on an ad, according to Adam Sohn, a director
in the company's Online Services division.

Although critics worry about companies knowing too much about their customers,
Microsoft and other proponents of behavioral targeting believe users ultimately
benefit when they see only ads relevant to them.

"We think that if we can provide the better experience" -- in advertising
as well as content -- "people will spend more time on our network,"
Sohn said.